BRDO PRI KRANJU, Slovenia — President Bush and European allies on Tuesday threatened tougher sanctions to squeeze Iran's finances and derail its potential pursuit of a nuclear weapon. Bush said the prospect of a nuclear-armed Iran would endanger world peace.

"They can either face isolation, or they can have better relations with all of us," Bush said of Iran's leaders while capping his final European Union-U.S. summit.

The president and EU leaders embraced new financial sanctions against Iran unless it verifiably suspends its nuclear enrichment. They said Iran must fully disclose any nuclear weapons work and allow the International Atomic Energy Agency to verify that work.

Iran is also under fire for defying three sets of U.N. Security Council sanctions and continuing to enrich uranium — which can generate both nuclear fuel and the fissile material for the core of nuclear warheads. Iran insists that it has only civilian uses in mind for its nuclear program.

The president flatly said Iran "can't be trusted with enrichment."

"A group of countries can send a clear message to the Iranians," Bush said. "And that is: we're going to continue to isolate you, we'll continue to work on sanctions, we'll find new sanctions if need be if you continue to deny the just demands of a free world."

Speaking to reporters on the lush, sun-splashed lawn near Brdo Castle, Bush also fielded questions on economic woes at home and climate change.

Global warming deal by January?Bush essentially rejected the idea of possible government intervention to prop up the value of the U.S. dollar. He said he believed in a strong-dollar policy, but that world economies will end up setting the value of the dollar.

On global warming, Bush declared, "I think we can actually get an agreement on global climate change during my presidency," which ends on Jan. 20, 2009.

He said no global warming agreement can be effective without China and India. The United States has been at odds with allies about whether any climate strategy should include mandatory emission reductions, among other sticking points.

Slovenian Prime Minister Janez Jansa, the president of the European Council, said European members and the United States might have different approaches to some of its common challenges. He said a global agreement without the developing countries would be a short-term solution.

But he added "those who are the most developed have to take the leading role."

The summit, consisting of about three hours of meetings and a working lunch, took place in a modern glass building on the vast Brdo grounds in the shadow of Slovenia's jagged mountain peaks. The president had a long list of issues to cover with his European counterparts, but Iran seemed to dominate.

Iranian banks linked to terrorism?Six world powers — the United States, Russia, China, Britian, Germany and France — are developing a package of fresh penalties and incentives aimed at reining in Tehran's alleged atomic ambitions. The EU's foreign policy chief, Javier Solana, plans to visit Iranian leaders soon in Tehran to appeal to them to accept negotiations over the nuclear standoff.

Bush and the heads of the EU, a political and economic coalition of 27 countries that works to promote security and commerce across the continent, called on Tehran to stop its support for terrorist organizations destabilizing the Mideast. The statement said the United States and the EU would work to ensure that "Iranian banks cannot abuse the international banking system to support proliferation and terrorism."

It was unclear whether the freshly stated concern over Iranian banks meant that Europeans had signed on for the kind of tough measures the U.S. favors, such as banning business with Iranian banks, or merely represented a repeat of previous calls for closer monitoring of dealings with them.

The Bush administration has warned that Iran is using an array of deceptive practices to hide involvement in nuclear proliferation and terrorist activities.

Iran insists that it has only civilian uses in mind for its nuclear program. Yet it is under fire for defying three sets of U.N. Security Council sanctions and continuing to enrich uranium, which can generate both nuclear fuel and the fissile material for the core of nuclear warheads. Iran has also stonewalled attempts by the IAEA to delve into allegations that several Iranian projects appear to represent different components of a nuclear weapons program.

'Additional measures'"A mutually satisfactory, negotiated solution remains open to Iran," the statement said. But the leaders also said that they would fully implement U.N. sanctions against Iran and were "ready to supplement those sanctions with additional measures."

Bush warned that if Iran ends up with a nuclear weapon, "the free world is going to say why didn't we do something about it at the time? ... Now's the time for there to be strong diplomacy."

Iran's central bank, also known as Bank Markazi, is involved in these deceptive acts, according to the U.S. government. The White House has been looking at new steps to cut off more Iranian banks from the international financial system and has been seeking backing from European allies.

Tensions over Iran are only rising. An Israeli Cabinet minister warned Friday that Israel will attack Iran if it doesn't abandon its nuclear program. Israeli Prime Minister Ehud Olmert distanced himself on Sunday from the statements but didn't explicitly reject them.

Verbal threats and political tensions have increased between Iran and Israel after Iran's hard-line President Mahmoud Ahmadinejad said in 2005 that Israel should be "wiped off the map."

"First of all if, if you were living in Israel you'd be a little nervous, too," Bush said. "If a leader in your neighborhood announced that they, he'd like to destroy you. And one sure way of achieving that means it through the development of a nuclear weapon. Therefore, now is the time for all of us to work together to stop them."

Bush said that Saudi Arabia's call for a summit between oil producing countries and consumer states to discuss soaring energy prices was "an interesting idea."

The leaders also called for the United Nations to send a team to Zimbabwe to monitor the human rights situation ahead of the second round of presidential elections on June 27. And they urged all sides to refrain from further violence over Tibet.

Bush was to fly to Berlin later Tuesday for a social dinner with German Chancellor Angela Merkel. During his weeklong stay in Europe, he also is going to Italy, France, London and Belfast.

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